Bitcoin is approaching a protocol dispute that has received far less attention than its potential consequences suggest.
BIP-110, formally known as the Reduced Data Temporary Softfork, proposes one year of tighter limits on the amount and type of non-financial data that can be included in Bitcoin transactions. Its supporters want to discourage blockchain data storage and keep block space focused on monetary activity. Its critics believe the proposal would interfere with valid, fee-paying transactions and could push a small group of nodes onto a separate chain.
The proposal has not been adopted across Bitcoin. Miner support remains far below its voluntary activation threshold, while a controversial mandatory signaling period is expected to begin in August. That makes BIP-110 less of a confirmed network upgrade and more of a live test of Bitcoin governance.
What Does BIP-110 Propose?
BIP-110 would temporarily add several restrictions to Bitcoin’s consensus rules. These include limits on large data pushes, witness data and certain Taproot functions commonly used to place arbitrary information on the blockchain.
The proposal would retain an 83-byte allowance for OP_RETURN outputs while limiting many other data fields to 256 bytes. It would also restrict Taproot annexes, large control blocks and several advanced scripting features.
Ordinals inscriptions, BRC-20 tokens and similar protocols would face the most visible disruption. They depend on transaction structures that can carry images, text or token information inside Bitcoin witness data.
The reach of BIP-110 is broader than inscriptions, however. Some Miniscript configurations, presigned transactions, BitVM-related constructions and future Taproot applications may also require changes. Standard BTC payments should generally continue to work, and outputs created before activation would be grandfathered under the proposal.
The restrictions are designed to expire after 52,416 blocks, or approximately one year.
Why Was BIP-110 Introduced?
The dispute grew after Bitcoin Core changed its default transaction relay policy for OP_RETURN data. Bitcoin Core 30 raised the default data-carrier limit and allowed multiple OP_RETURN outputs in one transaction.
That was a software policy change, not a change to Bitcoin consensus. Individual node operators and miners could still choose more restrictive settings. Supporters of BIP-110 argue that policy filters are not enough because miners can bypass them and include transactions directly in blocks.
Their concern is partly economic. Miners collect a transaction fee once, but full-node operators may continue storing and serving the resulting data for years. From this perspective, the fee market does not fully compensate everyone who carries the long-term cost.
Opponents see the issue differently. Bitcoin already has a fixed block-weight limit, and users compete for that space by paying fees. They argue that developers and node operators should not decide whether one valid transaction is more worthy than another simply because its purpose is easier to recognize.
This is why the debate has moved beyond Ordinals. It asks whether Bitcoin should remain neutral toward every transaction that follows its rules, or whether the protocol should actively favor monetary activity.
Miner Signaling Remains Far Below the Threshold
BIP-110 uses version bit 4 for miner signaling. Early lock-in requires 1,109 of the 2,016 blocks in a difficulty adjustment period to signal support, equal to 55%.
At the time of writing on August 3, the BIP-110 signaling monitor showed 32 signaling blocks among roughly 1,200 blocks in the current period. That represented a signal rate of approximately 2.7%.
The current period had fewer than 820 blocks remaining. Even if every remaining block signaled for BIP-110, the total would still fall short of the 1,109-block requirement. Voluntary lock-in is therefore no longer possible during this period.
The signal rate has increased from the levels recorded earlier in the summer, but it remains too small to indicate broad miner support. Most visible signaling activity has been associated with miners using OCEAN and BIP-110-compatible software. No comparable shift has appeared across the largest mining pools.
What Happens at Block 961,632?
The most important part of BIP-110 is its mandatory signaling mechanism. Beginning at block 961,632, nodes enforcing BIP-110 are scheduled to reject blocks that do not signal bit 4. This mandatory period would run through block 963,647, with lock-in scheduled no later than block 963,648. Full enforcement of the data restrictions would follow at block 965,664.
Based on the current block rate, the mandatory window is expected to begin around August 8 or 9, although the exact time may change.
The word “mandatory” can be misleading. Bitcoin has no central authority capable of forcing every miner or node to adopt the proposal. The rule is mandatory only for participants who have chosen to run BIP-110-enforcing software.
If most miners continue producing blocks without the signal, conventional Bitcoin nodes can keep accepting those blocks. BIP-110 nodes would reject them and wait for a signaling block. With limited supporting hash rate, those nodes could end up following a slower minority chain.
The result would not necessarily be a network-wide Bitcoin upgrade. It could instead be a chain split in which the established BTC chain continues under existing rules while a smaller BIP-110 chain enforces the new restrictions.
Bitcoin Knots Has Implemented the Proposal
The BIP-110 specification is marked “Complete” in the Bitcoin BIPs repository. This means the written specification has reached its completed stage. It does not mean that the network has approved or deployed it.
An implementation was included in Bitcoin Knots version 29.3.knots20260508. The relevant code and review history can be found in the Bitcoin Knots implementation record.
Bitcoin Core has not adopted BIP-110. As a result, users should not interpret the existence of working code or a completed specification as evidence of network-wide consensus.
Why Supporters Want the Change
Supporters describe arbitrary blockchain data as an abuse of resources that every node must help validate and distribute. They believe Bitcoin’s limited block space should primarily support payments, settlement and other monetary activity.
They also argue that Bitcoin’s current policy settings make it easier to treat the blockchain as permanent file storage. A temporary soft fork would give developers and users time to evaluate the effect of stricter limits while directing larger files toward systems such as Nostr, IPFS or BitTorrent.
From this viewpoint, BIP-110 is not an attempt to control every transaction. It is a temporary response to incentives that encourage users to place data on a network maintained by people who may receive no direct compensation for storing it.
Why Critics Fear a Chain Split
Critics question both the restrictions and the activation process.
Michael Saylor, Adam Back and Jameson Lopp have argued that turning a disagreement about transaction use into a consensus change may create a more serious problem than the unwanted data itself. Their concern is that Bitcoin’s rules would begin distinguishing between approved and disfavored uses of block space.
There are also practical questions. BIP-110 cannot make arbitrary data impossible to store. Users may split information across transactions, develop new encoding methods or move activity to other layers. The restrictions could therefore disrupt legitimate scripting applications without permanently solving the problem they target.
The low signal rate makes the mandatory activation method especially sensitive. A user-activated soft fork can influence miners when it has strong economic backing. When support is limited, the same mechanism can leave its users on a minority chain with lower hash rate, weaker liquidity and uncertain infrastructure support.
What Could BIP-110 Mean for Traders?
BIP-110 does not change Bitcoin’s maximum supply, block subsidy or standard monetary policy. It should not automatically be treated as a bullish or bearish catalyst for BTC.
The more immediate concern is market infrastructure. If a chain split becomes possible, exchanges and custodians may need to determine which chain they recognize as BTC. Some platforms could temporarily pause deposits or withdrawals while checking chain stability, replay risks and wallet compatibility.
A minority BIP-110 chain would also need enough mining power, users and liquidity to remain economically relevant. A forked chain can exist technically without gaining meaningful market recognition.
Traders following BTC markets through Tapbit should pay attention to official platform announcements rather than assuming that every BIP-110-related chain or token will be supported. Existing users can access their accounts through the Tapbit login page, while new users can register here.
Final Thoughts
BIP-110 began as an argument about inscriptions and arbitrary data, but it has become a wider debate about Bitcoin’s neutrality and the limits of user-activated consensus changes.
The proposal is technically complete and available in Bitcoin Knots, yet miner signaling remains far below the voluntary threshold. Its August mandatory signaling window may still produce a separate BIP-110 chain, but there is currently no evidence that the dominant Bitcoin network has agreed to adopt the new rules.
For traders, the distinction matters. BIP-110 is not an approved Bitcoin upgrade waiting to switch on. It is a contested proposal approaching a real-world test of miner coordination, node enforcement and economic support.
Frequently Asked Questions
What is BIP-110?
BIP-110, or the Reduced Data Temporary Softfork, is a proposal to introduce temporary consensus limits on arbitrary data in Bitcoin transactions. The restrictions would remain active for approximately one year.
Is BIP-110 already active?
No. BIP-110 has not activated across the Bitcoin network. Its specification is complete and an implementation is available in Bitcoin Knots, but that does not mean the proposal has received network-wide approval.
Has Bitcoin Core adopted BIP-110?
No. Bitcoin Core has not adopted BIP-110. The proposal has been implemented in Bitcoin Knots version 29.3.knots20260508 and related software.
